Utc Staying Upbeat

David Reaffirms Profit Forecasts For Year

February 11, 2003|By MICHAEL REMEZ; Courant Staff Writer

NEW YORK — United Technologies Corp. will be able to weather choppy economic conditions in 2003 because of the diversity of its businesses, its global reach and continuing efforts to boost efficiency, executives told Wall Street analysts Monday.

George David, UTC's chairman and chief executive, reaffirmed the Hartford-based company's earning estimates for the year, although he said war or a spate of new bankruptcies among the nation's airlines would require a reassessment.

And David indicated that UTC -- Connecticut's largest industrial employer -- could pick up the pace of acquisitions in 2003 because the prices of potential purchases are reaching more reasonable levels.

In recent years, the company has said it would spend about $1.5 billion a year on acquisitions, but last year it spent about $400 million. David said Monday that he expects to be closer to the goal of $1.5 billion in acquisitions in 2003.

``I think we may find more opportunities develop in the course of the next year or so, more than we saw in the last year,'' David told reporters after the session with the analysts.

He said his preferred course would be buying companies that fit with UTC's existing businesses, but he said he would be willing to consider a significant new business if the conditions and price are right.

``I happen to think there is good room for acquisitions at the core,'' he said, referring to the prospect of buying companies that could strengthen, for example, Pratt & Whitney or Hamilton Sundstrand or Carrier Corp.

Would he consider a major new division in a new direction?

He said he would rule out nothing. ``Certainly our bias would be more at the core.''

David said he expects the difficult economic environment to continue throughout 2003, but he said the company's divisions -- whose products include jet engines, elevators and air conditioners -- provide a balance that minimizes the negative effects.

The company expects profits for the year between $4.55 and $4.80 a share, with earnings helped by cost cutting and continued strength in Asia, especially for the Otis Elevators division. The earnings forecast compares with $4.42 a share in 2002.

Executives said UTC's global presence allows it to weather tough times at home, selling to emerging markets and farming out more of the work to lower-cost foreign subsidiaries and partners. That is especially true in countries such as China, which is undergoing a building boom beneficial to Otis and Carrier.

David repeatedly used the phrase ``balance and performance'' to describe the company, explaining that UTC does not depend too much on any single sector -- such as commercial aviation, an industry still struggling more than 16 months after Sept. 11, 2001.

Pratt and Hamilton both have seen declines in orders for new engines and aircraft components for commercial jets, but both have seen a jump in defense work. Part of that is the defense buildup since Sept. 11, but David said much of it can be attributed to key programs ramping up -- the F/A-22 Raptor fighter and the Joint Strike Fighter. Both projects are Pratt-powered, with Hamilton components.

On the commercial side, Louis R. Chenevert, president of Pratt, said the East Hartford-based division has taken measures to minimize the impact of Chapter 11 filings by U.S. airlines, working with customers whenever possible and making contingency plans.

``We can deal with what we see on the horizon. If there is a meltdown, then we have a problem,'' Chenevert said.

One way of reducing costs is to outsource more manufacturing work to foreign operations. Chenevert said Pratt would continue to send more of its ``legacy work'' offshore. The goal, he said is to outsource about 20 percent of volume by 2006.

Dean Borgman, president of Sikorsky Aircraft, said the helicopter maker also will benefit from the increase in defense spending. For Sikorsky, that means more secure funding for development of the Comanche helicopter and continued purchases of Black Hawk variants.